how do you tell when an engine is worn out?

Turn it over with your hand. If there is very little resistence then it is probably worn severly. Also when turing it over, do the slow test. Just turn it until it hits the compression then slowly push through it. A good seal won't let very much pressure out of the chamber but a worn one will let a lot past. When running, it will tend to run very hot but it will seem like it is rich, will be hard to restart when hot, and flameout a lot. If it is indeed worn out, most of the things listed will be there on your engine.